What to consider when choosing to rent or buy

Depending on the status of the real estate market the advice regarding renting versus owning can fluctuate, but for older adults ready to make a move, the state of the economy isn't the only consideration.

For some they have been living in the same location for decades and the hope is their next move will be their last — so it can be a very daunting and emotional decision.

The Joint Center for Housing Studies, Harvard University, released America's Rental Housing study in 2011. Not surprisingly, the study says baby boomers will continue to heavily influence housing trends. At the time of the study older adults made up 13 percent of the country's rental market, though baby boomers are expected to increase the number of renters to 2 million by the year 2020, according to the study.

Lisa Davis, a Realtor with Baird & Warner, knows firsthand the myriad considerations to be weighed before making a decision. She says the answer to rent vs. buy typically comes down to four factors: age, health, lifestyle and finances.

What's age got to do with it?

There is no magic age to answer the question: would buying or renting be more beneficial? With retirement age more scattered than in generations past there is no typical delineation.

So, health also needs to be factored in when considering living independently. Are there any physical limitations now or that can be foreseen in the future? Would buying even a small single family home keep you busy or become a burden?

There are some octogenarians who run three miles a day and experience very few health problems, explains Davis.

"They say 60 is the new 40, so some boomers reaching traditional retirement age still enjoy their careers or are finding part time work," she says. "Life expectancies are up and many 50 and older folks realize that retiring in their 60s is neither desirable nor feasible."

What does your future look like?

For many weighing renting against buying involves looking at the range of lifestyle options — not just current lifestyle, but what that lifestyle might look like in this next phase of life.

"If you want to travel and see the world during your retirement, a mortgage could strap you," says Davis. "On the other hand, many seniors are opting to buy into active, independent 50 plus luxurious communities. Here they enjoy maintenance free living, fitness centers, swimming pools, tennis courts, and daily activities —from bocce to badminton, painting to pinochle — with like-minded seniors "

Sylvia Virnich, 88, chose a 50 plus retirement community — Concord Place in Northlake — but liked that she could rent there instead of purchasing.

"I owned a home and loved it, but I was tired of keeping up the house," she says.

Looking at both options, Virnich says renting gave her more flexibility. For example, she says, she can change her living quarters if she wants. Judging from the downturn in the housing market the past few years, Virnich says she feels like she made the right decision.

"I'm alone and yet I'm not alone," she says of living in a retirement community in her own apartment. "I have all the freedom I want and I'm still very active, but there's no shoveling snow or cutting grass. I have a cleaning service once a week."

For those who plan to travel in their retirement, complexes and communities are often a good choice, Davis says.

"For snowbirds who live in the Chicago area, it's easier to leave behind an apartment in a multi-unit building versus a detached home regardless of whether they own or rent," she says. "They can leave their apartment with little or no heat for long durations and not worry about pipes freezing or bursting."

Another benefit to a multi-unit building is the added security of a doorman or apartment living with an elevator, Davis says.

Davis says for many of her clients the option of owning a home is still preferred, but many are ready to downsize or to find a home on one level or with fewer stairs.

"They enjoy tinkering in their gardens and actually enjoy home improvement projects," Davis says of some of her clients. "It gives them a sense of accomplishment and satisfaction especially if they are retired with time on their hands. They can also rehab and decorate to their liking if they own."

Owning typically means moving with less frequency and the option to alter the home with technology products and solutions like ramps, bars and chair lifts if the need arises in order to age in place, Davis says.

For those who are noticing declining health or have increased issues related to mobility, renting takes away the responsibilities of maintenance and repair that come with ownership.

Renting is often easier for seniors with declining health and mobility because maintenance is the responsibility of the homeowner or landlord, which includes repair to appliances and fixtures, snow removal, lawn mowing and general upkeep, Davis says.

However, this may not be an issue for others who can hire people to take care of maintenance and repairs, she adds.

Comparing the cost of renting and the cost of buying is not as simple as looking at a monthly mortgage payment and holding it up against the cost of a monthly rent.

One factor in Chicago and the surrounding suburbs is location. Home prices can vary widely suburb to suburb and city to suburb and rents vary neighborhood to neighborhood.

A 2012 Neighborhood Apartment Market Analysis for the city of Chicago provided by Appraisal Research Counselors shows lower rents in the range of $750 a month to $1,150 a month. Though Gold Coast and Northshore rents could be as high as $4,000 a month.

At Concord Place where Virnich resides, rent can range from $1,200 for an economy studio to $1,925 for a one bedroom with kitchen, both for a single occupant. Those prices, however, include three meals a day, utilities and weekly maid service, linen laundering and all activities. So what is or isn't included needs to be factored in as well.

According to the analysis and Davis, rental prices are expected to continue to rise as they have in the past few years.

When looking at a mortgage, it is important to look with a broader view taking into consideration the total amount of principal, interest, taxes, mortgage insurance, home owner's insurance as well as association fees if applicable, Davis says, adding it is important to also consider the value of the tax deduction received on mortgage interest and property taxes.

"Owning one's own home has always been a major part of the American dream," Davis says. "By the time one reaches 50 years of age, they most likely have experienced home ownership."

Longevity in a home may mean the owner has enough equity to qualify for a reverse mortgage if they prefer to remain in their home. Downsizing to a smaller, more manageable condominium or single-family home may eliminate the need for a mortgage, Davis says.

"The other option is to sell their homes and rent using the proceeds from their homes for other things," she says.

Not knowing what the future will hold can make the next step challenging. As Davis points out, many seniors live on fixed income from a variety of retirement benefits.

"A mortgage binds you to a specific amount each month and ties up the money you used as a down payment. Sudden medical expenses can destroy a fixed-income budget and if you own it's more difficult to make life changes," she says.

But, on the flip side, mortgage payments can be fixed for 30 years while rents are forecasted to rise nationally this year as they did last year, according the National Association of Realtors.

Many communities in the Chicago area do offer affordable housing to buy or rent for seniors.

Where to start

While someone may be emotionally vested in one option, sometimes a basic pros and cons list for each option can make the reality more clear.

There are resources available to do a side-by-side financial comparison of the two options. AARP offers a rent vs. buy calculator as well as definitions of many terms involved in both markets at its website www.aarp.org. Whether looking for help getting to the bottom of the debate or ready to make the next move, Davis suggests considering a Realtor with experience in eldercare. Realtors, like Davis, with a Seniors Real Estate Specialist designation can be found at www.seniorsrealestate.com.

"A Realtor with experience in eldercare, an SRES designee, is uniquely qualified to help facilitate a move to either a smaller, more manageable home, independent active community or an assisted living or nursing facility," Davis says.

They also can help with the other life decisions and emotions packed up in a move.

"An SRES can interact with seniors, adult children and caretakers to guide you through the process of selling your home, making the move less stressful and more successful," Davis says.